Google Messaging App Just for India?

Is it too late for Google to create a messaging app to rival Whatsapp, Line, WeChat, Viber and Line? And, if so, what chance would any tier-one telco have of doing so?

We might get a local test of whether it is now “too late” to get into the messaging app space as Google seems to be preparing for the launch of an India-focused messaging app in 2015.

Google has been “too late” before. Google missed “social” and “social on mobile.”

One might argue Facebook bought WhatsApp and Instagram to address both those features.

But Google might conclude India along is a big enough market to attempt a catch-up strategy.

Of the 600 million WhatsApp users, 65 million are in India. Viber has about 25 million Indian users. LIne has about 18 million users in India. WeChat might have between 25 million and 60 million users, in India.

Reportedly, Google will not charge a fee (WhatsApp charges $1 a year), will have Indian language support, and possibly voice-to-text features. The rumored message app might also not require Google single sign-in, either.

India is expected to become the world's second-largest smartphone market after China by 2019, and that might be the incentive to launch a Google messaging app for India.

How Much Potential for Dark Fiber Arbitrage of Leased Capacity?

Arbitrage, the exploitation of price gaps between products in markets, or prices between markets, always has been an important strategy in the telecommunications market.

One might argue that VoIP represented Internet arbitrage of the public switched telephone network.

Some free conference calling services likewise are built on arbitrate of access prices in some rural U.S. areas.

And though it is possible to argue that price arbitrate is not sustainable over the long term, it can be an important underpinning of business strategy, at least in the short term, allowing competitors to get a foothold in a market before transitioning to a more-sustainable model.

That, in fact, was the hope some held for local exchange carriers allowed to compete for the first time in the U.S. local telephone business as a result of the Telecommunications Act of 1996.

The thinking was that competitors would rapidly enter markets using resold connections, but then transition to facilities-based networks. For the most part, it did not work out that way, as it was the facilities-based cable TV operators that were able to build sustainable businesses, once wholesale tariffs were raised.

Something similar tends to happen in the wholesale capacity business as well, where most suppliers refuse to sell dark fiber, preferring the high gross revenue and profit margin of selling “lit” services.

But there almost always is customer demand for dark fiber, despite the general reluctance to sell the product. In some markets, the opportunity for arbitrage might not be so great, some argue.

“At some point, the cost of leased capacity and dark fiber is the same,” says Rozaimy Rahman, Telekom Malaysia EVP. That probably refers to total cost of ownership. But the point about arbitrage remains.

Some large enterprises, and certainly many carriers, will conclude that, at least in some instances, they will operate at lower costs when they are able to buy dark fiber and turn up their own networks.

By refusing to sell dark fiber, service providers might be creating a market opportunity for suppliers willing to do so.

In the long run, Rahman is likely correct: total cost of ownership, for an end user, might over the long term be nearly equivalent, for leased capacity or dark fiber approaches.

But arbitrage works because there are exploitable price differences in the short term. And Rahman is correct: the difference between dark fiber and managed bandwidth services, has at times past, n some markets, not been so great.

source: http://www-pam.usc.edu/volume5/v5i1a1print.html

Mobile is the Next Big Venue for Advertising, but Shift from TV to Online is Bigger, Near Term

When looking for key opportunities or threats in any business, it always is useful to follow the money.

Daryl Simm, Omnicom Group CEO of media operations, manages an operation representing  $54.4 billion in advertising spending globally.

So it is noteworthy that Omnicom Group has recently been advising its clients to move 10 percent to 25 percent of their TV advertising commitments to online video.

If clients follow that advice, the traditional gap between attention and advertising spend will start to close. In 2012, for example, advertising spend on television and print exceeded the audience those channels represented.

Mobile, which represented 12 percent of the actual audience, got just about three percent of the advertising. Internet audiences, representing 26 percent of the time spent with media, got about 22 percent of the ad spending.

To be sure, the gap between audience and ad spending has narrowed considerably over the past decade. The next big shift will be to mobile channels, given the wide gap between audience and advertising.

Over the long term, advertising will follow the audiences. Online audiences are growing. So are mobile audiences. TV, radio and print are shrinking. The money will follow.

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Does Technology Drive Growth, or Does Growth Drive Technology Investment?

The conventional wisdom is that investments in information technology and high speed access and other forms of communication contribute to economic growth.

Like many other bits of conventional wisdom, the relationship between economic growth and technology investment is unclear.

Though most believe that technology investment “causes” growth, some might argue that it is economic growth that drives technology investment. And the issue might be more complicated than that.

Some would argue that it is not “technology” that contributes to economic growth, but “innovation,” and that might be quite a different matter. Using computers to create online retailing perhaps is an innovation.

Using computers instead of typewriters to create documents, while more efficient, might not represent so much innovation.

And there is a complicated “dark side.” Huge economic transformations, such as the Industrial Revolution, also disrupt the economic fortunes of huge numbers of people.

“Somehow, information and communications technology and Internet Protocol help grow the economy,” said Rozaimy Rahman, Telekom Malaysia Global EVP.

Rahman noted Malaysia’s stated goal of “becoming a fully-developed nation by 2020.”

But one might note the high rates of economic growth across Southeast Asia and argue that it is growth that is driving communications adoption and investment.

 source: Malaysia Chronicle

The problem is that investment in information technology does not necessarily lead to near-term boosts in productivity.

Some of us might argue that technological advances do increase productivity, but only after a lag. The lag might be as short as a decade, but might take longer.

As a practical matter, policymakers will behave as though they believe the theory that information technology and high speed access drives growth. Though the actual causal process is not so clear, the risk of betting wrong is simply deemed too great.

How Crucial are Video Streaming, Linear Video for ISPs, Long Term?

Redbox Instant by Verizon, the streaming service Verizon created with Redbox, is shutting down on October 7, 2014. The closure says less about the current or longer term viability of the business, and more about how tough the current business might be. Redbox Instant simply was not able to get traction.

The logic was simple enough: leverage the Redbox base of 30 million customers to create a rival $8 a month streaming service able to compete with Netflix, among others.

For $8 a month, users were able to stream with no limits plus have four nights of rentals from the local Redbox DVD kiosks.

Redbox Instant customers also could rent console games from the kiosks.

But Redbox Instant simply failed to get traction. Some will point to the catalog, noting that Redbox Instant had thousands fewer titles than Netflix, for example. A bigger issue was that most of those titles could be viewed on Amazon Prime or Netflix as well.

And while Netflix and Amazon Prime offered popular TV services as well as movies, Redbox Instant was a movies-only service.

Consider that TV content might account for as much of 66 percent of all Netflix streaming views.

Some might also argue that Redbox Instant was not available on as wide a range of devices as Netflix can reach.

Netflix is available on every major console type--not just Xbox--and most smart TVs and DVD players sold in the recent past. Redbox Instant could not match that level of device ubiquity.

Also, given the drive for content exclusivity and original content, Redbox Instant simply had none.

Still, the fundamental business logic made sense: if Netflix was doing so well, there is a market. What Redbox Instant had to do was establish a value proposition.

That does not mean some other competitor might eventually challenge Netflix, only to note that, for the moment, Netflix is the service that sets the standard.

Verizon likely will simply try another tack. Compared to AT&T, Verizon executives seemingly have become skeptical about the profit margins from offering linear video subscriptions.

Many small and rural U.S. telcos likewise are rethinking their video strategy. The problem is that a small service provider lacking scale will find the video subscription business model quite challenging.

So even if the triple play now is the mainstay of the telco and cable TV provider business, there are growing signs even that could change.

Larger Internet service providers such as Comcast and Verizon likely see a future where high speed access is the core product and linear video might not be offered at all.

The only salient issue is whether to participate in the streaming business, and if, so, how. At least some smaller telcos already are retrenching, moving to a “voice and high speed access only” product model.

Not least of the reasons is that their business models hinge on universal service revenues, and universal service support now is available only to providers who sell high speed access plus voice.

Sprint Layoffs Illustrate Fundamental Telco Problem

Sprint Corporation has announced a workforce reduction plan (layoffs) that might mean the loss of 1400 jobs at Sprint.

Sprint says the cuts will cost $160 million in Sprint’s second quarter.

Such cuts always are disruptive for the affected employees. But the downsizing is not unusual for service providers these days, as difficult as the process might be.

“Costs are going up and revenue is flat,” says Anup Changaroth, Ciena director, portfolio marketing. “In some markets, there is negative revenue growth.”

From 2002 to 2013 the largest 15 service providers lost 69 percent of their former revenue-per-subscriber revenue,” Changaroth said, quoting data provided by IBM.

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Over the same period, profit margins dropped four percent to 22 percent.

Competition that attacks top-line revenue is part of the problem. Also, shifts in perceived value are an issue as well.

Nor is it clear such job cuts would have been avoided if Sprint’s bid to buy T-Mobile US had succeeded. Any large merger of that sort would be expected to result in some job losses, as “synergies” generally are possible.

Left on its own, Sprint, which many expect will fall from the third position in market share to fourth, simply has to find ways to cut cost, if it cannot grow revenues fast enough.

Also, if Sprint really wants to challenge T-Mobile US as the undisputed “value provider” among U.S. mobile companies, it would have to drive its operating costs lower, to compensate for expected hits to top-line revenue.

The planned employee layoffs, expected to be largely completed by October 31, 2014, will include management and non-management positions, Sprint says.

Sprint expects to recognize a charge of approximately $160 million in the second fiscal quarter of 2014 for severance and related costs, but Sprint also says additional material charges associated with “future labor reductions may occur in future periods.”

In other words, this might only be the first of multiple employee cuts.

As traumatic as the cuts might be, they are not unexpected. No firm that is having trouble on the top line can avoid making changes below the top line to preserve the bottom line. And with Sprint’s new resolve to take price leadership of the U.S. mobile market, the top line is going to be under pressure.

Sprint is not the first, nor will it be the last “old line” telco that has to confront the growing implications of a changing market. As unpleasant as such cuts might be, a shift of value in the communications ecosystem has been underway since at least 2000.

The phrase “software eats the world,” where value shifts to Internet apps and processes, captures the direction of the shift.

While it is reasonable for access and transport service providers to take measures to increase the value of their services, it is hard to ignore the broader shift of value creation and equity value to application providers, within the communications ecosystem.

Under such conditions, access and transport providers will find growing pressure to align costs to revenue, when value continues to shift to app providers.